Tax season is one of the most stressful times of the year for working citizens. Tax liabilities can quickly eat into your income and leave you with far less money for investments than you would like.
However, if you are in the 12 lakh tax slab, the new tax regime 2025 is cause for celebration, with some much-needed tax relief.
This article will explore the updated income tax on 12 lakhs income under the new regime and help you decide which tax regime, old or new, is best for you.
Key Updates for Budget 2025
The Union Budget for the fiscal year 2025-26 has introduced some key updates, including:
1. No income tax on 12 lakh salary or less due to increased rebate up to Rs. 60,000.
2. Modified tax slab rates for the fiscal year 2025-26 under the new tax regime:
Total income in rupees
Rate of tax
Up to 4 lakhs
0%
4 to 8 lakhs
5%
8 to 12 lakhs
10%
12 to 16 lakhs
15%
16 to 20 lakhs
20%
20 to 24 lakhs
25%
Over 24 lakhs
30%
Income Tax Slab Comparison: Old vs. New Tax Regime
The tax revisions introduced in the new tax regime significantly decrease tax burdens for individuals with income up to Rs. 12 lakhs, allowing them to enjoy zero income tax due to the increased rebate.
Rates for income tax on Rs. 12 lakhs to 24 lakhs annual income have also been lowered.
The following table illustrates the differences in income tax slabs between the old and new tax regimes:
Total income in rupees
Tax rate in the old regime
Tax rate in the new regime (2025)
Up to Rs. 2.5 lakhs
0%
0%
Rs. 2.5 lakhs – Rs. 4 lakhs
5%
0%
Rs. 4 lakhs – Rs. 8 lakhs
5%
5%
Rs. 8 lakhs – Rs. 12 lakhs
20%
10%
Rs. 12 lakhs – Rs. 16 lakhs
30%
15%
Rs. 16 lakhs – Rs. 20 lakhs
30%
20%
Rs. 20 lakhs – Rs. 24 lakhs
30%
25%
Over Rs. 24 lakhs
30%
30%
While the new tax regime has introduced financial relief for citizens, taxpayers still have the option to choose the old tax regime if they prefer the benefits particular to that regime instead.
Changes in Tax Deductions and Exemptions Under the New Tax Regime
The new tax regime offers limited deductions in comparison to the old regime:
1. Tax exemptions, such as House Rent Allowance (HRA) and Leave Travel Allowance (LTA), are no longer available.
2. Deductions under Section 80C, such as life insurance and PF contributions, have been removed.
3. Exemptions for transport and medical allowances are also unavailable.
However, there are still valuable saving opportunities provided by the new regime, including:
1. Rs. 50,000 flat deductions for salaried and pensioned individuals.
2. Deductions under Section 80CCD (2), like the employer’s contribution to the National Pension Scheme.
Old vs New Tax Regime: Which is Better For 12 Lakh Income Tax?
Which tax regime you should opt for will depend on the tax deductions available to you. If you are eligible for several tax deductions and exemptions, then the old tax regime will be optimal for you.
However, if you cannot claim significant deductions, the lower tax rates provided by the new tax regime will be more beneficial for you.
For an annual income of Rs. 12 lakhs, consider the following factors:
1. Salary income of Rs. 12 lakhs: Choose the old regime if your tax-saving investments are over Rs. 30,000. Otherwise, go for the new regime.
2. Non-salary income of Rs. 12 lakhs: Opt for the new regime if your tax-saving investments are less than Rs. 3,12,500. Otherwise, the old regime may be more beneficial for you.
Wrapping Up
The new tax regime 2025 offers much-needed tax relief for the common citizen. However, you may still find value in the old regime. Careful tax planning can help you maximize tax exemptions and boost your savings. Check out the Tata Capital blog to learn how to avail exemptions for tax on 7 lakh income.
Save money on your taxable income and achieve your homeownership goals with Tata Capital’s flexible home loan at attractive interest rates.
To learn more, check the Tata Capital website or download the app.
Your income level will help you choose which regime is best for you. If your salary income is Rs. 12 lakhs and you have tax-saving investments over three lakh rupees, go for the old tax regime. If savings are less than three lakhs, select the new regime. Alternatively, you can select the old regime if you have a non-salary income is Rs. 12 lakhs, and tax-saving investments are over Rs. 3,12,500.
What is the income tax rate for individuals earning more than Rs. 12 lakhs in a year in India?
For the financial year 2025-26, individuals earning more than Rs. 12 lakhs per year in India will have an income tax rate of 15% to 30%, depending on the individual’s salary.
What are tax deductions, and how can they help in reducing my tax liability?
Tax deductions include various tax allowances and exemptions. They help you save money by lowering your taxable income and tax liability. Tax deductions can be claimed under various expenses and investments, such as home loan interest and insurance premiums.
Can I claim deductions under Section 80C if my income is above Rs. 12 lakhs?
You can still claim deductions under Section 80C if your income is over Rs. 12 lakhs. These tax deductions can be claimed for investing in instruments such as National Savings Certificates, Equity-Linked Saving Schemes, and Provident Fund.
Are there any specific tax benefits for senior citizens with a Rs. 12 lakh salary?
Individuals aged 60 years or older have a higher basic exemption limit of three lakh rupees. Thus, senior citizens with a Rs. 12 lakh salary only have to pay tax on nine lakh rupees. Section 80TTB also lets senior citizens enjoy a higher interest income exemption limit.
Are there any tax-saving investment options beyond Section 80C for high-income earners?
High-income earners can benefit from tax deductions under Sections like 24(b) for home loan interest, 80D for health insurance premiums, and 80CCD (2) for employer’s contribution to NPS under the new tax regime.
10 March 2025
4 mins read
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